The Asset Allocation Committee enters the third quarter with a continued pro-risk posture, maintaining our overweight to global equities and U.S. large cap equities.
The AI buildout has evolved from a pure technology theme to driving a full macro cycle. We maintain an overweight to global equities, anchored in a structural view that the AI capital expenditure cycle is broadening, while earnings growth is robust and buyback activity runs at historic highs. U.S. 10-year yields are up significantly year-to-date, and the move has been driven almost entirely by rising real rates rather than inflation expectations. With equity-bond correlations less reliable for diversification, we upgraded hedged strategies to overweight and remain overweight commodities.
We remain neutral on U.S. rates, overweight European duration, upgrade high yield and asset-backed securities, and shift to overweight on hedged strategies with a preference for macro and absolute-return approaches.
In a dynamic global economic landscape, strategic investment decisions are paramount. By embracing innovation, particularly in transformative sectors like AI, and proactively managing risks through diversified and hedged portfolios, investors can position themselves for sustained growth and resilience. The current environment, marked by robust corporate performance and evolving market dynamics, underscores the importance of informed and agile investment strategies to capture opportunities and mitigate potential challenges.
